Perhaps some of you who have had experience with previous airline Chapter 7s (PanAm, Eastern, Braniff, etc) could shed some light on possible clues when an airline, such as US, is about to halt ops and liquidate.

First off, I believe they sometimes have extraordinary fare sales to build up cash when they know they're going kaput as of a certain date. Of course, credit card customers would be protected, except those whose dispute period would have passed. Another possible clue is when certain flights are cancelled. It's my understanding that some, perhaps most, foreign locations are less desirable places to have one of your aircraft stranded because it's easier for creditors to seize them. So perhaps a mass of flight cancellations of redeyes to Europe would be a precursor to US's chapter 7 filing later that day. Thoughts?

Another clue would be the web site no longer works; oh know, U's web site never works. Are they in liquidation? :eek:

I think that usairways will survive.

Perhaps some of you who have had experience with previous airline Chapter 7s (PanAm, Eastern, Braniff, etc) could shed some light on possible clues when an airline, such as US, is about to halt ops and liquidate.

This is a very useful question. The other day I skimmed the bankruptcy docket, the GE financing agreement, and US Airways' motion for relief, to familiarize myself with the milestones and the timing. I'd love to hear from experts whether there are discernible clues when liquidation is imminent.

Paul Marcelin-Sampson
Santa Cruz, California, USA

http://www.braniffinternational.org/history/finalhours.htm

Braniff's Final hours

Thanks pitflyer, interesting article. There was a recent BOS Globe article about US prospects and it talked about how apparently Logan Airport is preparing in the event that US shuts down....from finding new tennants like Air Tran or JetBlue, to how the airport would get back all the CIDA badges.

There must be some secret plan and meetings at CCY where they have crafted some kind of plan?

Is it the kind of thing that could just happen on Tuesday, or would we have little things (clues) happen a few days before? What is say the time window from the time that Bruce L would know it was shutting down to the first outward signs of shut down?

http://www.braniffinternational.org/history/finalhours.htm

Braniff's Final hours
Great article, thanks for the link

There will be little to no notice. They will want all their aircraft stateside and preferably parked at major stations, not stuck in places where they owe money and the a/c could be seized. So the first clue will be unexplained cancellations of eastbound transatlantics or late-day westbound transcons.

In the cases of Braniff and Pan Am the public only got word of the shutdown when it was well underway. (As the article linked above makes clear, the first evidence that Braniff was shutting down was aircraft piling up on the ramp at DFW... management was telling Dispatch to cancel outbounds without explaining why, let alone calling a press conference. Read John Nance's "Splash of Colors" for an excellent account of Braniff's tailspin.)

I believe this could happen to US any time now.

There was a really interesting documentary on one of the lesser known public service satellite stations (Colors maybe?) about the demise of Sabena. A film crew was filming a documentary on Sabena at Brussels airport when they suddenly realized something fishy was up. They chronicled the whole demise over two days. It was very interesting that the line staff were the last to know!

I believe this could happen to US any time now.

I say this with all due respect and sincerity: what's your expertise/knowledge/insight for this statement?

Envoy Boy: It doesn't take a rocket scientist to discern at this point that it's all over for USAir. Sure it's not fair to the many good employees, customers and shareholders. But life will go on. This will bring closure and in fact, a cull in the herd may be the best thing to happen for the prospects of the other legacy carriers. Sorry if this sounds cruel, but it's honest- I still miss Pan Am, Braniff and Eastern.

Well, I respectfully disagree that it is "all over." The chances may be a little dimmer than they were prior to Christmas meltdown, but I don't see any indication to throw in the towel just yet...........all of this is sheer speculation by EVERYONE at this point.

There is this theme that a carrier is worried about their a/c being seized. But if the whole place is shutting down, why worry about it at that point. Or do they keep management on, and they sort of get a bonus or some sort of recognition if they sell the planes rather than having them seized by creditors?

I also miss Eastern even though I never flew them, the first airline club I visited was the EA Ionespheer in BOS in the now demolished terminal A. I was about 16 or 17 and they served me :), and I remember I got some snacks and they put them on a little table, and I had left something in the club and they mailed it to my home. Also I miss the Pan Am and the Trump Shuttle, back when the shuttle was treated as more than just another main line flight and had much more of a mystique to it. Back then the shuttles competed on service, and there were extensive adds touting each shuttles service which are 99.9% gone today.

There was a really interesting documentary on one of the lesser known public service satellite stations (Colors maybe?) about the demise of Sabena. A film crew was filming a documentary on Sabena at Brussels airport when they suddenly realized something fishy was up. They chronicled the whole demise over two days. It was very interesting that the line staff were the last to know!

This was an excellent documentary. It is on DirecTV on the LinkTV network every once in a while.

http://www.linktv.org/programming/programDescription.php4?code=brussels

Envoy Boy: It doesn't take a rocket scientist to discern at this point that it's all over for USAir. Sure it's not fair to the many good employees, customers and shareholders. But life will go on. This will bring closure and in fact, a cull in the herd may be the best thing to happen for the prospects of the other legacy carriers. Sorry if this sounds cruel, but it's honest- I still miss Pan Am, Braniff and Eastern.

I don't think it's unreasonable of me to not take any/every opinion off the internet as valid and sound.

I'm just asking if the poster has any authority or special knowledge. Anyone, literally anyone, could post here. I'd like to hear from someone with expertise in anaylsis of the industry or something. Not just some poster who's never been heard from on this forum until recently, with no disrespect to the poster intended.

Forgive me for trying to make an educated judgment of my own. No matter what the topic or source, I think it behooves each of us to be discerning users of the internet.

I was working for CO back in the 80's (Frank Lorenzo era). The talk of Ch.11 was in the air, salaries were cut, benefits curtailed, etc.

We were in the communications (electronic) group, and the high-level phone traffic was available to those in the know (we were in the know :) ). Even with all that, the decision was made only a couple of days before it happened; I was back home to sign the papers to sell my house and move to Texas when I got word to not show up on Monday. That would have been nice -- no job and no house!

Anyhow, the situation then was different. A US liquidation would probably be forced (CO's entry into Ch.11 was voluntary). Once the decision is made by one or more of the creditors (or a judge), things will happen quickly.

I was able to successfully burn 200K miles on a nice F trip to Rome this month, so I'd be stuck with less than 50K orphans. The Star Alliance thing really got me excited.

Hate to see it happen; I've had a lot of very nice experiences with US over the years, all the way back to the Mohawk days <sniff>.

Methinks that previous posters are correct. All it takes is for one straw to fall and the whole tent caves in immediately thereafter. That's what happened with EA and BN. I don't think anyone can keep an ear to ground and expect to have secret insider knowledge of when things will happen. It'll all be done behind VERY closed doors and the news will travel swiftly to say the least.

My heart breaks for this airline. :(

I say this with all due respect and sincerity: what's your expertise/knowledge/insight for this statement?

EnvoyBoy, the only "inside information" I have re: US is a friendly relationship with a former mid-level executive in customer service who quit his position in late fall to seek another line of work. We attended some ballgames together in Baltimore around October 1, and at that time he said most people who knew how to run an airline had already left US... the few talented people remaining were looking... and that it was commonly accepted in the exec offices that there was really no way to right the enterprise, no plan for ever turning cash positive in the short to medium term, and a winter/spring final endgame was inevitable.

Other than that I have no special insight into US affairs other than a detailed understanding of Braniff's, People Express', Pan Am's and Eastern's demise scenarios. US is in that same position now: bitter, terminal labor relations, operational crises, constant negative media which feeds the book-away-from-US mentality (which then leads to more negative media, etc., etc.), management increasingly at the mercy of circumstance. We've seen this movie before and the last reel always looks the same.

I take no pleasure in this; I grew up with Allegheny, Piedmont and USAir. I'm so sorry.

Firstly, they are already in bankruptcy for the second time, with no access to debtor financing. Anything they own is hocked, and RSA has to know they are flushed, as far as the monies invested by them. I believe current accounting rules require recognition of asset value reduction, by way of "impairment charges" , although in light of the bankruptcy, such adjustments may be moot. All of this continues to beg the question, why? Why are they still flying? The only answer I can come up with is multi choice:

1.They believe in, or are hoping for miracles

2.They will run until the cash and government
loan guaranties are gone

3. They are working on some plan to sell all, or
part of what's left.

I am inclined to think it's number 3, especially with their labor and other costs so low for the first time in the company's history.

Two things I have learned in the deal business. If it goes under, it will be fast, without warning. Secondly, when you have a business in some distress, and it suddenly gets quiet over there, something is usually happening on the buy/sell side.

Lastly, while what's running the place is probably not hall of fame material, win, lose, or draw, you can bet we will see some of these same names again, at other places. This is a tribal industry, which clearly believes that only airline people understand airlines, and it produces 'results" which prove it.

I think that most of these possible "impending shutdown maneuvers" relate to management strategies to somehow re-start the airline, or still have their jobs after a takeover. In the Braniff story, they were entering Chapter-11, (reorganization) and they thought they might be able to get going again.

When I was watching several dot-com's implode a few years ago (where all my friends worked), there were usually very few signs until things completely fell apart.
When management sees a no possible personal upside, they don't really have any motivation to play these games. It's sort of "Controlled flight in to Terrain"... Everything runs normally until the the lights (literally) go out.
Sometimes managers of collapsing companies don't even bother to formally liquidate. Once there's no money to pay for your own paycheck, what's the point?

EnvoyBoy, the only "inside information" I have re: US is a friendly relationship with a former mid-level executive in customer service who quit his position in late fall to seek another line of work. We attended some ballgames together in Baltimore around October 1, and at that time he said most people who knew how to run an airline had already left US... the few talented people remaining were looking... and that it was commonly accepted in the exec offices that there was really no way to right the enterprise, no plan for ever turning cash positive in the short to medium term, and a winter/spring final endgame was inevitable.

Other than that I have no special insight into US affairs other than a detailed understanding of Braniff's, People Express', Pan Am's and Eastern's demise scenarios. US is in that same position now: bitter, terminal labor relations, operational crises, constant negative media which feeds the book-away-from-US mentality (which then leads to more negative media, etc., etc.), management increasingly at the mercy of circumstance. We've seen this movie before and the last reel always looks the same.

I take no pleasure in this; I grew up with Allegheny, Piedmont and USAir. I'm so sorry.

Thanks! Now I'm sorry I asked. I'm wishing your opinion was less informed. :(
Happy New Year.

This is a tribal industry, which clearly believes that only airline people understand airlines, and it produces 'results" which prove it.

Ain't that the truth? Excellent point. How else to explain people like Tom Plaskett staying employed? There's probably a good book to be written on the insularity of airline business culture has helped to bring the industry to death's doorstep. Kind of like Detroit in the '70s.

Thanks! Now I'm sorry I asked. I'm wishing your opinion was less informed. :(
Happy New Year.
I live in Charlotte and am VERY loyal to this airline. I even thought about going to the airport myself to hand out donuts and coffee, etc.

Today's Sunday big front page article in the Charlotte Observer: ''AN AIRLINE IN CRITICAL CONDITION"
http://www.charlotte.com/mld/charlotte/business/10547095.htm?1c

Not good...but saying any shutdown would start after Jan. 14th. This article certainly won't help bookings.

IMPORTANT DATES (as I understand..feel free to edit or chime in)

Wed. Jan. 5
Flight attendants finish voting on agreement

Thursday, Jan. 6
Bankruptcy judge may rule on throwing out mechanics & fleet service workers' contracts. Also may decide if US can throw out 2 pension plans.

Jan. 13
US goes to court to see if Air Transportation Stabilization Board will allow airline to continue using cash reserves. (Heavy negotiations going on now)

Jan. 14
Deadline with GE to find $100 million investment (or equivalent in cost cutting) AND to have the $1B labor savings.

Sigh. I'm still pulling for this airline. I have a lovely Envoy transatlantic trip to France booked for myself and 5 clients on Jan. 19. Personally I wouldn't mind getting "stuck" there! (I know, I know, some of you would disagree!)

Happy New Year to all you wonderful Flyertalkers!

http://www.msnbc.msn.com/id/6763789
US Airways Group Inc. has said that without an immediate reduction in labor costs it probably will begin liquidation after an interim financing deal with the government’s Air Transportation Stabilization Board expires Jan. 15.

Yes, it does look pretty grim.

I've begun to notice that other carriers are not matching USAirways fares, price shopping on Travelocity and others, USAirways will be considerably lower, with all the others higher, but matched at the same price. I don't see this as a good sign.

Why are they still flying? The only answer I can come up with is multi choice:

1.They believe in, or are hoping for miracles

2.They will run until the cash and government
loan guaranties are gone

3. They are working on some plan to sell all, or
part of what's left.



Deelmakur,

Do you have the details on their current cap structure (such as it is)... who is holding the cards on the debtholder side of the table? Certainly ATSB is secured, as are the airplane leaseholders... is there another big player out there?

The reason I ask is that I was thinking about your use of the term "they"... "they" must be the workout group, as I would think should the debtholders be rational actors (not all that huge a leap of faith considering the sums involved) they would liquidate if they believed that the expected value of liqiuidation was greater than the expected value of continued ops. Right? This isn't management's call.

I observed the government role in the ATA deal. At the eleventh hour, America West suddenly disappeared, likely waived off by the feds, who reminded them they have their own balance due to ATSB (the age old mathematical axiom....nothiing and nothing equals nothing). Then SWA moved to the pole position with a phased takeover deal that would normally have run the anti trust flag up. I do not believe Southwest would have proceeded without some quiet discussion with your government beforehand. For ATSB, it's women and children into the boats. With bankruptcy, and no ability to access DIP financing, there is no capital structure. Just an NNW (negative net worth). That's why it's called bankruptcy. The only way to save a billion dollar federal write off is to be midwife to some sort of plan which allows them to carry the obligation as current. "They" refers to USAir equity holders, potential acquirers, and an embarrassed government, which would probably look the other way on anything that avoids realizing the loss on those guarantees. Of course, all this presupposes the players are that attuned. The thing could also just be hopelessly drifting. What I am watching for is a guy like Baldanza jumping ship. The operating guys always know when the business is dead, well before the equity, which has to wait for the official numbers each month. He is actually well thought of in some circles within the industry, and is probably more employable than most of what else is left. He also doesn't have a Siegel-type financial parachute. No real compelling reason to stay to the end. If he bolts, call the credit card refund number.

All the right ingredients for demise are present: High debt, low cash, high fuel costs, poor labor/managment relations, poor responses to new competiton, lenders calling day-to-day shots, unhappy customers, unhappy employees, lots of bad press, nervous travel agents, and a flying public that, in general, couldn't care less if there were one less airline to fly.

There's not much left that U hasn't already screwed up or could do worse than they have. It's a shame.

And if it is a Ch. 7, they will just leave the planes wherever they are - and let the lenders go get them. BN brought them all back to DFW under Ch.11 as they thought they might be able to successfully reorganize and fly them again. Not the case in a liquidation.

BN also apparently never thought about operating straight through a Chapter 11 filing, which is SOP nowadays.

All the right ingredients for demise are present: High debt, low cash, high fuel costs, poor labor/managment relations, poor responses to new competiton, lenders calling day-to-day shots, unhappy customers, unhappy employees, lots of bad press, nervous travel agents, and a flying public that, in general, couldn't care less if there were one less airline to fly.

There's not much left that U hasn't already screwed up or could do worse than they have. It's a shame.

And if it is a Ch. 7, they will just leave the planes wherever they are - and let the lenders go get them. BN brought them all back to DFW under Ch.11 as they thought they might be able to successfully reorganize and fly them again. Not the case in a liquidation.

I could be wrong on this and I assume that someone knows, but was Braniff having the same sort of lobor problems as US is now experiencing, or was the liquidation a result of many unhappy creditors and secured lenders?

ATA could be a useful model, but dealmakur could be wrong as he theorizes that the gov't told AW to end it. Nobody knows for sure.

One thing that others have not mentioned is that Aloha just filed for bankruptcy, as well. Does anyone know if the gov't is owed anything by that airline??

IF so, the gov't may just want to finally cut their losses with US Air.

As I have said, I think that management and all of the unions have got to come to some sort of agreement fast and publicly state from there on out,there is a new environment at US Air and hope that GE and the ATSB and the public buy into it.

If not, then it is curtains and I think we shall know by 1/15/05 and certainly by 1/31/05.

It just seems to me that US Air is running on fumes right now. :(

Do you have the details on their current cap structure (such as it is)... who is holding the cards on the debtholder side of the table? Certainly ATSB is secured, as are the airplane leaseholders... is there another big player out there?

The reason I ask is that I was thinking about your use of the term "they"... "they" must be the workout group, as I would think should the debtholders be rational actors (not all that huge a leap of faith considering the sums involved) they would liquidate if they believed that the expected value of liqiuidation was greater than the expected value of continued ops. Right? This isn't management's call.

it's management's call until the court runs them out of town... so far, the court has done everything that management has asked for.

November was a gloomy month for US Airways. Operating losses were $27m, net losses (including interest and restructuring) $58m. Cash increased, to 822m, but mainly as a result of restricted cash decreasing, to 104m. There is a severe working capital problem/liquidity crisis in the offing, as there are $1.5 billion in current assets vs. $2.5 billion in current liabilities... The monthly balance sheet does not differentiate amongst creditor classes, instead lumping them all together as "subject to compromise":

http://investor.usairways.com/EdgarDetail.cfm?CompanyID=U&CIK=701345&FID=701345-04-53&SID=04-00

US Airways Group, Inc. Consolidated Balance Sheet as of November 30, 2004

Current Assets
Cash and cash equivalents $ 822,869
Restricted cash 104,169
Receivables, net 294,502
Materials and supplies, net 168,398
Prepaid expenses and other 127,421
Total Current Assets 1,517,359

Property and Equipment
Flight equipment 3,179,214
Ground property and equipment 380,662
Less accumulated depreciation and amortization (304,997 )
3,254,879
Purchase deposits for flight equipment 138,010
Total Property and Equipment 3,392,889

Other Assets
Goodwill 2,489,638
Other intangibles, net 534,145
Restricted cash 653,250
Other assets, net 43,761
Total Other Assets 3,720,794
Total Assets 8,631,042

Current Liabilities
Current maturities of long-term debt and capital lease obligations 701,104
Accounts payable 349,862
Traffic balances payable and unused tickets 916,409
Accrued aircraft rent 59,894
Accrued salaries, wages and vacation 169,091
Other accrued expenses 276,667
Total Current Liabilities 2,473,027

Noncurrent Liabilities and Deferred Credits
Long-term debt and capital lease obligations, net of current maturities -
Deferred gains and credits, net 44,537
Postretirement benefits other than pensions 1,592
Employee benefit liabilities and other 245,298
Total Noncurrent Liabilities and Deferred Credits 291,427

Liabilities Subject to Compromise 6,164,627

Commitments and Contingencies

Stockholders' Deficit
Class A Common Stock 50,615
Class B Common Stock 5,000
Paid-in capital 410,050
Accumulated deficit (697,262 )
Common stock held in treasury, at cost (2,815 )
Deferred compensation (16,670 )
Accumulated other comprehensive loss (46,957 )
Total Stockholders' Deficit (298,039 )
Total Liabilities and Stockholders' Equity (Deficit) $8,631,042
*

I've begun to notice that other carriers are not matching USAirways fares, price shopping on Travelocity and others, USAirways will be considerably lower, with all the others higher, but matched at the same price. I don't see this as a good sign.

Sounds like a good sign to me! So many travelers these days consider only price when buying their airline tickets, so if US Airways is lowest they may draw some extra traffic from flyers who, unlike most of us, don't care about FF miles.

What I am watching for is a guy like Baldanza jumping ship. The operating guys always know when the business is dead, well before the equity, which has to wait for the official numbers each month. He is actually well thought of in some circles within the industry, and is probably more employable than most of what else is left. He also doesn't have a Siegel-type financial parachute. No real compelling reason to stay to the end. If he bolts, call the credit card refund number.

If Baldanza is well regarded within the industry, it's no wonder all the legacies are broke or close to it. Tribal groupthink to the max.....

it's management's call until the court runs them out of town... so far, the court has done everything that management has asked for.

November was a gloomy month for US Airways. Operating losses were $27m, net losses (including interest and restructuring) $58m. Cash increased, to 822m, but mainly as a result of restricted cash decreasing, to 104m. There is a severe working capital problem/liquidity crisis in the offing, as there are $1.5 billion in current assets vs. $2.5 billion in current liabilities... The monthly balance sheet does not differentiate amongst creditor classes, instead lumping them all together as "subject to compromise":

http://investor.usairways.com/EdgarDetail.cfm?CompanyID=U&CIK=701345&FID=701345-04-53&SID=04-00

US Airways Group, Inc. Consolidated Balance Sheet as of November 30, 2004

Current Assets
Cash and cash equivalents $ 822,869
Restricted cash 104,169
Receivables, net 294,502
Materials and supplies, net 168,398
Prepaid expenses and other 127,421
Total Current Assets 1,517,359

Property and Equipment
Flight equipment 3,179,214
Ground property and equipment 380,662
Less accumulated depreciation and amortization (304,997 )
3,254,879
Purchase deposits for flight equipment 138,010
Total Property and Equipment 3,392,889

Other Assets
Goodwill 2,489,638
Other intangibles, net 534,145
Restricted cash 653,250
Other assets, net 43,761
Total Other Assets 3,720,794
Total Assets 8,631,042

Current Liabilities
Current maturities of long-term debt and capital lease obligations 701,104
Accounts payable 349,862
Traffic balances payable and unused tickets 916,409
Accrued aircraft rent 59,894
Accrued salaries, wages and vacation 169,091
Other accrued expenses 276,667
Total Current Liabilities 2,473,027

Noncurrent Liabilities and Deferred Credits
Long-term debt and capital lease obligations, net of current maturities -
Deferred gains and credits, net 44,537
Postretirement benefits other than pensions 1,592
Employee benefit liabilities and other 245,298
Total Noncurrent Liabilities and Deferred Credits 291,427

Liabilities Subject to Compromise 6,164,627

Commitments and Contingencies

Stockholders' Deficit
Class A Common Stock 50,615
Class B Common Stock 5,000
Paid-in capital 410,050
Accumulated deficit (697,262 )
Common stock held in treasury, at cost (2,815 )
Deferred compensation (16,670 )
Accumulated other comprehensive loss (46,957 )
Total Stockholders' Deficit (298,039 )
Total Liabilities and Stockholders' Equity (Deficit) $8,631,042
*




Goodwill 2,489,638? (I presume billions)?

More like goodwill 000000!

M

The company's Balance Sheet is upside down. "Goodwill" is a non cash, intangible number, in accounting speak, which allows the numbers to "balance". They owe more than they are worth. The real number is "shareholders equity". That shows as a deficit (there isn't any), a chunk of cash is restricted (probably required by ATSB), and a bunch of what is termed "liabilities", referred to as "compromised" appears to be things which are pledged, and therefore, effectively not theirs (I'm not an accountant, so perhaps somebody can help me on that one). The Court continues to let them operate, largely because their biggest creditor hasn't asked it not to. That creditor is Uncle Sam, hence my earlier thoughts about behind the scenes acitivity, as with ATA.

A further thought on government participation. Through ATSB, they are the major lender. The default remedy was meant to be increased equity in the borrower. That provisoon was why several airlines declined to use the credit. They feared shareholder dilution. USAir has no equity. I know of no transaction involving the acquisition of a business which owes a lot of money, where the lender isn't involved. For one thing, they can stop it, so before you even start, you have to know what they will and won't do.

Sounds like a good sign to me! So many travelers these days consider only price when buying their airline tickets, so if US Airways is lowest they may draw some extra traffic from flyers who, unlike most of us, don't care about FF miles.

It doesn't sound good at all. While price is a major factor for the leisure market in selecting an airline, the concern over U and whether or not they will be around to provide travel, more than offsets saving a couple hundred bucks.

Leisure travel isn't really all that flexible - it's tied to family reunions, anniversaries, spring break, connecting with cruise lines, scheduled time off from your company, etc. And missing/reshceduling those events at the last minutes is not a good thing...and another reason to avoid an airline that may leave you and your family stranded.

That's why the PHL fiasco hurt U so badly - people forgot they were paying $99 as soon as they realized they would miss Christmas with their family - and will never fly U again.

Although paying by credit card may offer protrection in getting a refund if U goes under, that's little consolation if the day before your planned vacation flight U ceases flying, and you're stuck with the choice of two evils - cancelling your vacation or buying last-minute tickets on other airlines - at much higher fares than the original fare on U.

That's a chance most people don't want to take, and why many major travel agenices are advsing booking other airlines than U - even for leisure travel.

By Steve Halvonik TRIBUNE-REVIEW
Sunday, January 2, 2005

Think US Airways had a bad 2004?

The new year could be even more turbulent, industry analysts said.

The nation's seventh largest airline must continue to grapple with industrywide problems -- high fuel prices, overcapacity, cheap fares -- while trying to successfully emerge from bankruptcy reorganization for the second time in two years.

"US Airways remains hostage to industry trends,'' said William Lauer, an analyst who follows the airline for Allegheny Capital Management in Tarentum. "If overcapacity continues to deny the legacy carriers any pricing power, there are going to be problems.''

The Arlington, Va.-based carrier, which filed for bankruptcy in September, is expected to pass a major milestone this week by securing $1 billion a year in labor savings. Three unions, including pilots, already have ratified new cost-saving contracts worth almost $500 million a year in wage and benefit savings.

Flight attendants will vote on Wednesday on a new contract that will provide US Airways with $157 million a year in savings.

The International Association of Machinists and Aerospace Workers, which represents about 9,000 mechanics, baggage handlers and fleet-service workers, are still trying to hammer out an agreement worth $350 million a year in savings.

If the IAM or the flight attendants fail to deliver, U.S. Bankruptcy Judge Stephen S. Mitchell is poised to impose the company's cost-saving terms on them Thursday morning.

While labor savings are a major component in US Airways' cost restructuring, they alone do not ensure its survival, industry experts said.

During the next three months US Airways faces several major hurdles. It needs to make $260 million in aircraft lease payments, negotiate an extension of its $700 million loan agreement with the Air Transportation Stabilization Board and secure at least $250 million in new equity.

It also must still contend with high fuel prices that threaten to eat up what little cash cushion it still enjoys. US Airways budgeted fuel expenses based on oil prices averaging $44 a barrel through March. Each dollar oil prices are above that level costs US Airways about $2 million a month.

Even if US Airways achieves all of the goals of its business plan, it still expects to lose $200 million in 2005, according to former chief financial officer David M. Davis. He said the airline expects to break even in 2006 and 2007 before realizing profit margins of 3 percent to 4 percent in 2008 and 2009.

That's "a losing business model,'' said Vaughn Cordle, chief analyst with Airline Forecasts in Washington, D.C.

"Nobody is going to put equity into that company -- that's a given,'' he said.

US Airways must depend on the kindness of creditors and vendors to maintain operations, Cordle said.

If high fuel prices and labor unrest -- such as the operational meltdown suffered during Christmas, when US Airways was forced to cancel more than 500 flights due to employee sickouts -- persist in 2005, creditors may start a cash run that sinks the company, Cordle said.

Lauer agreed that if labor problems persist, "there's no question there will be adverse reactions in the marketplace which could be the first of several dominoes that could take the airline down.''

The threat of labor unrest remains high, because US Airways is yet to implement the job reductions and outsourcing it has threatened. The result is that thousands of jobs will likely be eliminated early this year, including many at Pittsburgh International Airport.

If US Airways outsources baggage handling and closes its reservations center in Green Tree and its aircraft maintenance facility at Pittsburgh International Airport, its local unionized work force could tumble from almost 6,000 to fewer than 2,000.

US Airways has not announced which facilities it has targeted for closing. Union officials, however, believe that the local reservations center and maintenance facility will be shuttered.

Job losses and outsourcing could trigger more labor strife that spooks creditors and customers alike.

US Airways was rattled in the fall when puncture wounds, which appeared to be made by a screw driver, were discovered in the bellies of several jets. Employee vandalism was suspected, but the FBI never announced any arrests.

Baggage handlers staged sickouts and slowdowns in November that tied up luggage carousels in Philadelphia.

Reservations agents and flight attendants voted to strike in December if their contracts were canceled.

Those events were a harbinger to the Christmas catastrophe, when hundreds of baggage handlers and flight attendants called in sick.

"A series of labor actions (in 2005) could put the final nails in US Airways' coffin,'' Cordle said.

Teddy Xidas, president-elect of US Airways' flight attendants' union, said the Christmas fiasco proved "we're in a crisis.''

She added, "We have to reorganize. We have to resolve our problems, and we have to come together.''

I will take quick day or 1 night trips for business on US. If it goes out of biz on one of those trips, I can deal with the situation. I do not intend to book even a Feb vacation ( family of 4 ) trip on US. Even if the fare is half of the other carriers, I just do not want to deal with the dislocation and hassle.

This airline is dead. I was at the PHL airport yesterday. Terminal E ( WN ) security lines were extending right up to baggage claim escalators. I had to drop off some guests for their jungle jet flight to IAH from F. I did not go to B or C terminals.Terminal F ( admittedly that's the commuter/regional jets) did not have 1 person waiting in security lines!

The "volunteer" staff of US was significantly present. They were being quite helpful to everyone and had coffee, cupcakes and pretzels. Not a lot of people were around compared to the mob scene in E). It felt like a wake.

US Airways was rattled in the fall when puncture wounds, which appeared to be made by a screw driver, were discovered in the bellies of several jets. Employee vandalism was suspected, but the FBI never announced any arrests.

I hadn't heard of this....this is scary if its true. I have often wondered to what extreme would someone go in terms of either slacking on an important job (maintenance) or even knowingly doing damage to an aircraft as part of the labor dispute. Organized labor has a history of resorting to violence, and I don't think its a crazy notion to think that it could happen in the airline industry as well.

Sean

The company's Balance Sheet is upside down. "Goodwill" is a non cash, intangible number, in accounting speak, which allows the numbers to "balance". They owe more than they are worth. The real number is "shareholders equity". That shows as a deficit (there isn't any), a chunk of cash is restricted (probably required by ATSB), and a bunch of what is termed "liabilities", referred to as "compromised" appears to be things which are pledged, and therefore, effectively not theirs (I'm not an accountant, so perhaps somebody can help me on that one). The Court continues to let them operate, largely because their biggest creditor hasn't asked it not to. That creditor is Uncle Sam, hence my earlier thoughts about behind the scenes acitivity, as with ATA.

Yes, the Goodwill is a pretty much useless intangible asset. Amortizing it could produce cash, but that only works when there is income to shelter from tax.

The cash-- well, 822m is unrestricted and 104 restricted (due to ATSB and other loan covenants, and tax withholding accounts too probably). Throw in the other current assets and there's $1.5 billion in "liquid assets". Liabilities due by 11/30/05 are a scary $2.5 billion. Who's going to come up with the $1 billion dollar difference between now and November??

As to the big picure: The Equipment-- roughly $3 billion as carried on the books, is mostly already pledged as collateral to the debt (that's the $6 billion in longer-term debts "subject to compromise"). If ATSB is first in line, and GE and ARS second, there's precious little left for anyone else.

...That's why the PHL fiasco hurt U so badly - people forgot they were paying $99 as soon as they realized they would miss Christmas with their family - and will never fly U again...


This is the real key IMHO. Price is definitely an important factor (and the often-discussed one), but reliable, dependable transportation is even more important. It's not mentioned that much because it's taken for granted, but it wasn't for granted in PHL ~2 weeks ago.

I booked award tickets on US to Nassau (Atlantis resort) departing this weekend because I was able to get FF availability and I was using a timeshare week and just had to pay the exchange fee ($130). If the trip goes off, great, if not, I wouldn't have gone, no big loss.

However I have another vacation in March to Las Vegas, but this time we are meeting (and possibly travelling with) family members. For the relatively minor discount USAir is providing on tickets compared to other carriers, it's just not worth the risk of possibly not being able to fly, or having to completely rebook new flights on short notice. My brother is booked for Disney World over Easter, and is also looking for flights, and although (like others have discovered) he has found US to have the cheapest flights right now, I told him to think long and hard about booking on them.

If they'll still be in business thru at least April, great. If they folded now, also (sort of) great, in that at least he wouldn't have committed to them. But having them in limbo now, not even knowing if they'll be in business, but after ~2 weeks ago, knowing if while they are in business, operations could come to a halt (and we are both flying out of PHL) I just don't think is worth the risk.

Jeff

Perhaps some of you who have had experience with previous airline Chapter 7s (PanAm, Eastern, Braniff, etc) could shed some light on possible clues when an airline, such as US, is about to halt ops and liquidate.
<cut>
So perhaps a mass of flight cancellations of redeyes to Europe would be a precursor to US's chapter 7 filing later that day. Thoughts?

Australia & New Zealand has seen 2 airlines go out of business in the last few years, Ansett and Qantas NZ, from what I read and heard may offer some clues.

Ansett, I booked a flight 5 days from the end with 24 hours notice, and noticed that the whole day had flights across the board at $100.00 which was the usual low fare for that route, plane was over 80% full, so the airline must have been desperate, I think Qantas was double, $180-$200, Most of Ansetts flights were cheaper than the low cost carrier Virgin Blue.
Ansett, had a work colleague fly ansett a day before shutdown, he flew Thursday, they shutdown Friday morning, he said there was no food onboard, Australia had reasonable food offerrings but this flight had none,
Ansett, a big event, Ansett was Sept 11,
Ansett, you couldn't get insurance on flights a few days from the end.
Ansett, Qantas didn't want to buy them for a $1.00
Qantas NZ, no food onboard again.

Don't ask the staff they probably be the last to know. Ansett were still taking bookings about an hour before the shutdown.

Probably I also be watching for unusual cancellations, although in the above examples I can't there were any.

January is usually a bad month, no more major travel events for a few months, so the cash won't be coming in to pay off any older debts.

There will always be clues, it will just be hard to work out before the event happens.

Take a look at my thread entitled "The Surrogate Airline". It ties to this one.

While I am still somewhat hopeful that US will avoid liquidation, I would expect very few clues that anything is in the works. I would expect that if there is a shutdown, it would occur in the early morning hours once the US bound European flights are off the ground and headed for home, which would be around 6am Eastern, with a lot of ferry flights taking place getting planes and crews from out stations back to the hubs. Whatever happens, it will come fast and without much in the way of warning.

Although my memory may be faulty, it seems that Lakefield made a promise
soon after filing chapter 22, that liquidation would be orderly and there would
be advance notice.

Does anybody remember or have a copy of this?

Who would most likely pick up the LaGuardia shuttle routes and the LaGuardia terminal?

Who would most likely pick up the LaGuardia shuttle routes and the LaGuardia terminal?

I know AirTran is a very likely contender for BOS. I would assume they'll be looking at LGA as well.

Although my memory may be faulty, it seems that Lakefield made a promise
soon after filing chapter 22, that liquidation would be orderly and there would
be advance notice.

Does anybody remember or have a copy of this?

I wouldn't believe it even if he did say that - besides, if it turns out that he wasn't telling the truth what are us customers to do about it? Stop flying USAir? I'd doubt that the final decision is up to him, and management's fiduciary responsibility is to debtholders more than customers. If an abrupt shutdown yields higher returns to the debtholders, he's obligated to pursue it.

Ansett, I booked a flight 5 days from the end with 24 hours notice, and noticed that the whole day had flights across the board at $100.00 which was the usual low fare for that route, plane was over 80% full, so the airline must have been desperate, I think Qantas was double, $180-$200, Most of Ansetts flights were cheaper than the low cost carrier Virgin Blue.
Ansett, had a work colleague fly ansett a day before shutdown, he flew Thursday, they shutdown Friday morning, he said there was no food onboard, Australia had reasonable food offerrings but this flight had none,
Ansett, a big event, Ansett was Sept 11,
Ansett, you couldn't get insurance on flights a few days from the end.
Ansett, Qantas didn't want to buy them for a $1.00
Qantas NZ, no food onboard again.

Don't ask the staff they probably be the last to know. Ansett were still taking bookings about an hour before the shutdown.



Yes, I remember this quite well. I received a notice under my door at the Brisbane Marriott that Ansett had ceased operations, so I had to find another way back to Sydney. When I called my corporate travel department, they refused to re-book my return on Qantas because their computer was still showing Ansett as operating on schedule. They also didn't consider my situation an "exception to policy" (thereby warranting an itinerary change) because I was scheduled to fly back to the U.S. on September 16, and they were concerned with employees who were "truly" stranded due to the events of 9/11. It took about 5-6 hours for them to verify that Ansett had indeed shut down.

Who would most likely pick up the LaGuardia shuttle routes and the LaGuardia terminal?

On a semi-related note, does anyone envision USAir doing an ATA-type move, and try to sell off parts of it's company, and remain operational, before a full shutdown? Or is US too big that carving up pieces of it couldn't occur until at least a complete outright purchase was considered?

Jeff

Should I be concerned for a flight I have booked this Friday? Might something happen after the judge's decision? or are things pretty safe until mid-Jan.?

:confused:

Booked or travelling? I think some other 'important dates' thread mentioned Jan 15 or so as the date either one of the unions agrees to reduced wages, or a judge could possibly throw out the previous collective-bargaining agreeement. I hope those are the right dates, I'm scheduled to return to PHL from Nassau on Friday the 14th, and although I'm sure it's a nice place, I really don't want to be stranded there.

Jeff

Jeff

I'm in your shoes by a few days with a family of four. Planning to go to Nassau on Jan 15 and return on the 18th. I really don't want to get stranded either.

What's our backup?

Who would most likely pick up the LaGuardia shuttle routes and the LaGuardia terminal?

I know AirTran is a very likely contender for BOS. I would assume they'll be looking at LGA as well.

Who would most likely pick up the LaGuardia shuttle routes and the LaGuardia terminal?

Jetblue and American both want the shuttle, along with airtran. The terminal would go back to Continental.

Jeff

I'm in your shoes by a few days with a family of four. Planning to go to Nassau on Jan 15 and return on the 18th. I really don't want to get stranded either.

What's our backup?

Service between Nassau (and PHL) is provided by US, AA, CO, DL, NW, Air Canada, and AirTran. First thing I would try is if another carrier is honoring the $25/segment fee if your original carrier stops flying. If that doesn't fly, I'd see how much each might charge for a one-way ticket back home.

My last (and hopefully best) option would be use FF miles. Ideal would be a one-way standard award on NW (think 17500 FFM), worst case 70k for a choice/rulebuster award (on DL/NW/CO).

Jeff

Jetblue and American both want the shuttle, along with airtran. The terminal would go back to Continental.

Similarly, I'm sure Southwest would love to expand at PHL. They have 4 gates at E concourse and 2 in D, you'd almost wonder if they wouldn't look to take over all of either B or C, or maybe both. I think SW came to PHL partly as a defensive measure to keep JetBlue from expanding into there, with US gone there would probably be enough slots for both airlines.

The looser at PHL would certainly be F terminal (I think 100% US commuter flights, not likely to be picked up by anyone), and the international departures out of A terminal.

Jeff

Do we really need a new thread each day on the impending demise of US?

Might time be better spent figuring out how to re-book your trips, obtain refunds, and perhaps an eye towards finding a status match from one of the surviving carriers?

We already know where all of the regulars stand on this issue, so why waste more time beating a dead horse?

Jeff

I'm in your shoes by a few days with a family of four. Planning to go to Nassau on Jan 15 and return on the 18th. I really don't want to get stranded either.

What's our backup?

You don't want to get stranded in Nassau? :confused:

:p

Do we really need a new thread each day on the impending demise of US?

Might time be better spent figuring out how to re-book your trips, obtain refunds, and perhaps an eye towards finding a status match from one of the surviving carriers?

We already know where all of the regulars stand on this issue, so why waste more time beating a dead horse?

IMHO, "re-book your trips, obtain refunds, and perhaps an eye towards finding a status match" are also all horses already beaten dead on multiple threads.

Similarly, I'm sure Southwest would love to expand at PHL. They have 4 gates at E concourse and 2 in D, you'd almost wonder if they wouldn't look to take over all of either B or C, or maybe both. I think SW came to PHL partly as a defensive measure to keep JetBlue from expanding into there, with US gone there would probably be enough slots for both airlines.

The looser at PHL would certainly be F terminal (I think 100% US commuter flights, not likely to be picked up by anyone), and the international departures out of A terminal.

Jeff

Southwest said a few months ago that they want to pick up quite a few gates at PHL. But with the recent addition of the gates at MDW, they may be overstrecthing just a bit.

It has just been mentioned that when the judge rules on Thursday, that the mechanics union may take some sort of action on Friday. For those traveling that morning, Im wondering what concerns there may be for flight plans. or if there is little chance of a strike...

Southwest said a few months ago that they want to pick up quite a few gates at PHL. But with the recent addition of the gates at MDW, they may be overstrecthing just a bit.

hmm... could a sign of impending doom be the annoucement of WN moving into PIT? I hear the vultures circling.

IMHO, "re-book your trips, obtain refunds, and perhaps an eye towards finding a status match" are also all horses already beaten dead on multiple threads.

ClueByFour: could we make this thread as well as this one (http://www.flyertalk.com/forum/showthread.php?t=384711) stickies?

It seems there are quite a number of concerned DMers who are being curtly pointed to "other threads" for info.

(Most of said 5-6 post threads being mainly comprised of DMers who are being curtly pointed to "other threads" for info. :p )

Their major competitor reduces fares across the board, driving down USAirways yields,

AND

Another major competitor cherry picks some of their highest revenue customers in a fortress hub.

Oh wait, Chicken Little, the sky really is falling at USAirways :)

(Answer Key: Delta Simplifares and Southwest in PIT)

hmm... could a sign of impending doom be the annoucement of WN moving into PIT? I hear the vultures circling.

The vultures are circling, but the airline will not die. If US somehow escapes this month, I see other airlines trying to take them out at the knees. Southwest at PIT and PHL. I wouldn't be surprised to see another airline try for Charlotte.

The vultures are circling, but the airline will not die. If US somehow escapes this month, I see other airlines trying to take them out at the knees. Southwest at PIT and PHL. I wouldn't be surprised to see another airline try for Charlotte.

Financially sick airlines are like zombies. It will take quite a few silver bullets or stakes through the heart to finish them off. Re CLT, it wouldn't surprise me if Southwest goes after US there, after their attacks at BWI, PHL and now PIT. That's assuming that the PIT deal isn't the coup de grace (or the xmas luggage fiasco).

Financially sick airlines are like zombies. It will take quite a few silver bullets or stakes through the heart to finish them off. Re CLT, it wouldn't surprise me if Southwest goes after US there, after their attacks at BWI, PHL and now PIT. That's assuming that the PIT deal isn't the coup de grace (or the xmas luggage fiasco).

Charlotte issues:

1.) WN is in a way moving into CLT already with there take-over of ATA (the only exsisting low-fare carrier in CLT).

2.) The advantage of CLT as a hub will not diminish with a small low-fare precense. Yes it will lower fares on those routes but US still monopolizes an enormous amount of connecting traffic from really small places which will never have low-fare service. CLT is a functional hub in a great location with an outstanding route system.

3.) Lack of gate capacity for a large WN expansion. US has maxed out B, C, D & E in CLT. There are 8 or 9 gates on the A concourse, all being used by majors who have only 1 or 2 a piece and wouldn't give them up.

Charlotte issues:

1.) WN is in a way moving into CLT already with there take-over of ATA (the only exsisting low-fare carrier in CLT).


WN does not have access to CLT through ATA, ATA stopped flying to CLT last week!! Just wanted to make sure people have the correct information.

Just wanted to make sure people have the correct information.

This is a speculation and mis-information thread only. :p ;)

WN does not have access to CLT through ATA, ATA stopped flying to CLT last week!! Just wanted to make sure people have the correct information.

Haha - ok I guess that was a bad point then. Thanks for the correction - with more PHL-BNA service (up to 5x daily from 2x a couple of years ago) I'm able to avoid CLT and haven't been there in months. Not that PHL is better than CLT - it's just my usual destination.

FWIW, I just read that WN is not the only LCC eye PIT. Supposedly, Air Tran is to make an announcement quite soon that they will flying into/out of PIT according to a local Pit paper.

FWIW, I just read that WN is not the only LCC eye PIT. Supposedly, Air Tran is to make an announcement quite soon that they will flying into/out of PIT according to a local Pit paper.

Am I missing something? Airtran already flies out of PIT. I think they go to ATL and FLL.

FWIW, I just read that WN is not the only LCC eye PIT. Supposedly, Air Tran is to make an announcement quite soon that they will flying into/out of PIT according to a local Pit paper.

They already run 2x/day PIT-MCO, and 4 or 5x/day PIT-ATL.

They tried PIT-LGA, PIT-MDW, and PIT-PHL a few years back, but US drove them off.

I'd expect Fronteir and Spirit to announce PIT next. I think LUV probably just scared Jetblue off...

Am I missing something? Airtran already flies out of PIT. I think they go to ATL and FLL.

You are correct. They are probably going to add cities.

You are correct. They are probably going to add cities.

If I were running Air Tran I would expand the cities served before adding more routes between exsisting cities. They are fall closer to offering full-service amenities than any other LCC (other than America West which is on the opposite coast) but can not be a viable choice for customers looking to be loyal to a carrier but have a variety of destinations.

Optimisim comes at a premium.

http://www.pittsburghlive.com/x/tribune-review/regional/s_291263.html

If I were running Air Tran I would expand the cities served before adding more routes between exsisting cities. They are fall closer to offering full-service amenities than any other LCC (other than America West which is on the opposite coast) but can not be a viable choice for customers looking to be loyal to a carrier but have a variety of destinations.

I agree with you on that thought. Lets say US Airways completely folds. How many gates do they lease or own at Pittsburgh. I would say, including Air Tran, there might be 3 new entrants to Pittsburgh this year. (I am not counting Hooters Air)

There was a really interesting documentary on one of the lesser known public service satellite stations (Colors maybe?) about the demise of Sabena. A film crew was filming a documentary on Sabena at Brussels airport when they suddenly realized something fishy was up. They chronicled the whole demise over two days. It was very interesting that the line staff were the last to know!

It's a fascinating documentary and should be required viewing for all airline employees at US and elsewhere. One of the most memorable scenes at the end of the film is a group of cabin and ground staff scaling an airport fence, then holding hands in a circle around one of the planes and chanting and singing, as if this was somehow going to make the airline solvent again. It was very sad.

What I am watching for is a guy like Baldanza jumping ship. [snip] If he bolts, call the credit card refund number.

Ansett, I booked a flight 5 days from the end with 24 hours notice, and noticed that the whole day had flights across the board at $100.00 which was the usual low fare for that route, plane was over 80% full, so the airline must have been desperate, I think Qantas was double, $180-$200, Most of Ansetts flights were cheaper than the low cost carrier Virgin Blue.

Baldanza jumping ship? Check. (http://www.flyertalk.com/forum/showthread.php?t=388252) Insane fare sale? Check. (http://www.flyertalk.com/forum/showthread.php?t=388839)

A colleague just left on a business trip to SEA. He's been booked on US. I made sure he knew about the $25 standby law... :(